Markets “In a Nutshell” for October 2, 2023
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 1.30%, the S&P 500 was down 0.70%, and the NASDAQ rose 0.10%. Foreign stocks (MSCI EAFE) were down, falling 2.00%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 4.58%. (Data source: Wall Street Journal)
Markets Head Into 4th Quarter
Markets struggled in the 3rd quarter after a strong first half of the year. The S&P 500 fell 3% in the quarter making it the first negative quarter in a year for the index. Since 1990 the S&P 500 has had a negative quarter 11 times and in the 4th quarter, markets rebounded 9 of the 11 times, averaging an impressive 10.6% return the final 3 months of the year. The 4th quarter tends to perform well regardless of how the 3rd quarter went as since 1990 the average return for the 4th quarter is 5%. The last time the 4th quarter was negative was in 2018 and in the 4 years since the average 4th quarter return has been 9.5%. Investors will hope for more of the same as we head into the end of the year.
Rates Continue to Rise
Higher rates have been putting pressure on markets recently despite the Fed not raising rates in its most recent meeting. The Fed signaled to the market that rates would be higher for longer and markets had not had that completely priced in. The 10-year treasury rose above 4.6% last week for the first time since 2007. After nearly 15 years of ultra-low rates, investors will have to adapt to this new interest rate environment. Investors are hoping that rates are near their peaks as the last few spikes in yields, and stocks rebounded nicely as rates came lower. The other positive is that inflation seems to be stabilizing lower compared to the last year and a half. Yields could be around their peak and could begin to fall if the Fed begins to signal a rate cut in the near future.
How many times since 1990 has the 4th quarter been negative for the S&P 500? (Scroll Down for Answer)
Have a Great Week!
4. 6 times. Q4 tends to be strong for markets to close out the year and investors are hoping for more of the same to end this year.